Global Market Quick Take: Europe – 19 June 2024

Key points:

• Equities: AI rally continues with Nvidia becoming most valuable stock in the world
• Currencies: Weaker USD on negative US retail sales, AUD stronger on hawkish RBA comments
• Commodities: Crude oil remains in an uptrend
• Fixed Income: US yields continue to decline on negative surprise in US retail sales
• Economic data: EIA weekly crude and fuel stock report

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

In the news: Why Americans are not buying more EVs (FT), Chinese copper glut grows in sign of sluggish economy (FT), Nvidia’s 591,078% Rally to Most Valuable Stock Came in Waves (Bloomberg), EU to Slam France Over Budget Deficit, Adding to Political Woes (Bloomberg), Inside Citigroup’s Most Mysterious Business (WSJ)

Equities: Hong Kong equities are up 2.7% today on expectations of financial market reforms while futures are indicating a slightly higher open in European and US equities. The big news yesterday was Nvidia overtaking Microsoft as the most valuable company in the world with a 7.3% weight in the S&P 500 and a market value of $3.34trn. Ferrari is announcing its first electric vehicle model which will go on sale for at least $500,000. The ZEW survey yesterday was mixed adding some questions to the strength of the rebound in the European economy. There are no important macro or earnings events today to move markets, so the main focus will be whether momentum can extend further on the back of the current AI rally.

Macro: Yesterday’s US retail sales was softer-than-expected, and there were also downward revisions to the prior month sending some caution on the state of the consumer. Several Fed speakers spoke in a general tone of waiting for more data before cutting rates. Williams said that 3% inflation is not the new normal and the Fed will get inflation down to 2%, while both Barkin and Kugler were encouraged by the May inflation print. The German ZEW Economic Sentiment slightly rose to 47.5 (prev. 47.1, exp. 50), its highest figure since February 2022. However, optimism failed to spark due to current conditions deteriorating vs market expectations of improvement and the headline missing expectations.

Macro events (times in GMT): UK CPI (May) exp 2% vs 2.3% prior (06:00), EIA’s Weekly Crude and Fuel Stock report (14:30)

Earnings events: No important earnings today.

• Thursday: Accenture, Kroger, Darden Restaurants, Jabil
• Friday: FactSet, CarMax

For all macro, earnings, and dividend events check Saxo’s calendar

Fixed income: The yield on the US 10-year Treasury note fell to 4.22%, approaching its lowest level since late March, after a $13 billion auction of 20-year US government bonds. Key focus is still on the France-Germany 10-year spread which has pushed to elevated levels since Macron announced a snap election post his party’s embarrassing EU parliamentary election result. The French 10-year yield has come down a bit over the past couple of trading sessions reflecting the market is not overly worried about the French election outcome in July.

Commodities: Gold traded near 2,310, close to its 1-month low of 2,290, impacted by a strong dollar and reduced central bank demand in Asia. The People's Bank of China paused its aggressive gold-buying spree in May due to high prices. Oil continued its upward momentum from the previous day, as traders anticipate support for prices due to summer demand. Additionally, natural gas surged by 4.3%, ending a four-day decline, driven by hot weather forecasts boosting demand expectations. Iron ore trad around $107 per tonne, remaining close to the lowest level since April, as a set of economic data contributed to concerns about demand for ferrous metals from China.

FX: USD weakened modestly yesterday due to softer US retail sales and Federal Reserve officials advocating patience with rate cuts. The AUD is rising following a hawkish stance from the RBA, which kept the possibility of a rate hike open, while AUDNZD also climbed to 1.0850. The British pound wavered around 1.27 ahead of the UK CPI release and the Bank of England's rate decision. The euro traded near 1.0730 as French election concerns eased and Eurozone inflation met expectations. Meanwhile, the Swiss franc hit a three-month high, with USDCHF dropping to 0.8827, below the 200-day moving average, in anticipation of the Swiss National Bank meeting on Thursday.

Volatility: The VIX ended Tuesday at $12.30 (-0.45 | -3.53%). Short-term volatility indicators also declined, with the VIX1D at $9.51 (-0.34 | -3.45%) and the VIX9D at $11.12 (-0.82 | -6.87%). The SKEW index, which measures the perceived risk of outlier moves in the S&P 500, fell to 142.90 (-10.94 | -7.11%), indicating a reduction in perceived tail risk. Today is Juneteenth, a US holiday, so markets will be closed. VIX futures are currently at $14.300 (+0.005 | +0.03%). S&P 500 and Nasdaq 100 futures show minimal movements: S&P 500 futures are at 5561.00 (+1.25 | +0.02%) and Nasdaq 100 futures are at 20217.75 (+21.50 | +0.11%). Yesterday's top 10 most traded stock options were Nvidia, Apple, Tesla, Advanced Micro Devices, Palantir Technologies, GameStop, Amazon, Taiwan Semiconductor, Micron Technology, and Dell Technologies.